Earlier today I appeared before the Senate Legal and Constitutional Affairs Legislation Committee to give evidence in relation to the Inquiry into the Bankruptcy Amendment (Enterprise Incentives) Bill 2017 and the proposed One Year Bankruptcy Regime.
Below is a copy of the statement I read at the beginning of my appearance.
My name is Alice Ruhe and I am a partner in the firm Sellers Muldoon Benton.
I am thrilled to be able to participate in this process and assist where I can.
I am not a lawyer, or a policy maker, but rather I am a Chartered Accountant, a Trustee in Bankruptcy and a Registered Liquidator, and I see my contribution to this discussion to be more practical than anything else.
Whilst my practice does extend to corporate insolvency, personal insolvency, bankruptcy, does make up a considerable part.
I can understand the slated reasoning behind the proposed reduction to the Bankruptcy period, however I cannot reconcile that with the state of play with respect to personal insolvency at this time. I am struggling to think of many bankruptcies with which I have been involved especially recently, that have concerned sole traders. Those that have been “business related” have rather involved individuals that were directors of unsuccessful companies and that were exposed by way of personal guarantees, for example.
I have spelled out in our submission, some of the practical implications I can see from a one year Bankruptcy period. I have now read the other submissions and note the comments provided therein.
There are a few additional points I would seek to make:
The Objection to Discharge regime is not exactly easy for Trustees in Bankruptcy to invoke and AFSA can be quite inconsistent in its review of same. Last year I had two bankrupts in very similar situations due for discharge but for which objections to discharge were filed for a number of reasons including to allow for finalizations of investigations into voidable transactions and in order to obtain compliance when conducting Public Examinations.
In one instance the Objection was upheld, the investigations continued and Public Examinations undertaken. We are now in the process of finalizing the estate and that bankrupt has been discharged.
In the other case, two objections were set aside following the Inspector General’s review. The Bankrupt was discharged and despite filing an application for Public Examinations and summonses issued for early February, the Bankrupt has gone overseas and was “unavailable” to attend. We are now hoping for an examination date in May.
If a reduced Bankruptcy period is invoked, I would like to see a more user-friendly Objection regime – with all of the usual checks and balances, of course.
With respect to income assessments. I reiterate my position in the submission in relation to the time-frames within which bankrupts have to provide their information and how this could, under the proposed regime, be later than the automatic discharge date and leave little recourse for Trustees.
Also, it pays to note that those individuals with complex affairs (which are generally those who are liable to make larger income contributions to their estates), can have their assessable incomes vary significantly following the lodgement of their tax returns. If they have a tax agent (which they regularly do) they may not have their return lodged until May the following year. This could then cause major issues in the calculation of their income contributions for bankruptcy purposes and the collection of same.
This is before we even start to discuss the time it takes to investigate a Bankrupt’s affairs and attempt to realize assets and make recoveries from antecedent transactions.
Two more things.
A significant amount of the time and fees incurred in Bankrupt estates are done so at the start of an appointment. This is due to both statutory and investigative requirements.
Accordingly, I query the appropriateness of having a separate subsequent trustee appointed in estates where there has been non-compliance by a discharged Bankrupt.
Finally, whilst I have issues processing how a one year bankruptcy would effectively work in practice, I would think a reduction of the Bankruptcy period to two years could resolve a lot of the issues raised.
Thank you .